As humans we’re drawn to luxury.
Today, we crave Rolex watches and Tesla Roadsters.
And thousands of years ago, the ancient Romans craved luxury products too.
They wanted one so much that it was, literally, worth more than its weight in gold: Purple dye.
Rich and Royal Romans paid enormous sums for clothes made with purple dye. The dye didn’t make clothes any warmer or more durable, but it did signal hierarchy in the social order.
Purple dye was scarce because it was extracted from sundried sea snails in a time consuming and difficult process. It took up to 250,000 snails to make one ounce of dye. And just one pound of purple wool cost more money than most Romans made in a year. Phoenician traders worked in overdrive to meet demand and became rich in the process.
Like the Romans, we’ll always crave luxury goods that are scarce and expensive even if they don’t have any real practical use. Either you’re working hard towards making your own goals and dreams come true, or else you’re working hard towards someone else’s. And with the ridiculously high profit margins on luxury products, we’re often doing the latter.
In a thread from Patrick O’Shaughnessy recapping The Luxury Strategy, he writes that, “The essence of luxury, therefore, is the symbolic desire to belong to a superior class…” Luxury brands know this and make it the focal point of their marketing. They want the purchase decision to be emotional rather than rational.
@Patrick_OShag continues…
“The goal of Rolex’s advertising is not to sell Rolexes, but to make those who have the means to buy a Rolex happy that others, who do not have the means to do so, know what a Rolex means. The luxury dream is boosted by the distance between those who know and those who can.”
We’re conditioned to think that fancy cars, homes, and clothes indicate success.
But in The Millionaire Next Door, Dr. Thomas Stanley writes that those who focus on material possessions actually have little wealth built up. He found that most millionaires avoid high-consumption lifestyles and prefer simplicity. Among the Seven Factors that Stanley found millionaires to have in common, the first three state that:
They live well below their means.
They allocate their time, energy, and money efficiently, in ways conducive to building wealth.
And they believe that financial independence is more important than displaying high social status.
So the desire to buy luxury goods is something to overcome on our path to building wise wealth and financial freedom. The first step is acknowledging this reality. Otherwise lifestyle creep sets in and the more you make, the more you’ll spend. It will be a slow but steady turning-up of the spending dial that leads to a paycheck-to-paycheck lifestyle.
There’s always the desire for more.
Just look at Rajat Gupta. His career path took him from top universities to becoming CEO of McKinsey. He earned over $100 million and built a sterling reputation with political and business leaders.
But, some of Rajat’s peers made 10X what he did and his billionaire friends made donations equivalent to his entire net worth. Rajat felt poor compared to those around him and his desire for more led him to abuse his role on the Board of Goldman Sachs and get arrested for insider trading.
So if luxury purchases are emotionally driven and we always want more and better things, how can we build up our defenses?
Next time we’re tempted to whip out the Chase Sapphire and say “Screw it, I work hard!” … what can we do?
I’m reminded of a story from Dan Ariely’s book, Predictably Irrational. Ariely conducted an experiment and found that people were less likely to lie and cheat if they were reminded of the Ten Commandments before acting. It didn’t matter whether or not the participants were religious or if they could even recite the Commandments. All that mattered was being reminded of them first. Deep down people associate the Commandments with a sense of doing the right thing and this overcame the desire to win.
So I propose that before you make the next luxury purchase, first remind yourself of Mother Teresa. She is someone we can immediately associate with serving others. Even if we don’t know all the details of her life, we know that she gave up all her worldly possessions and achieved purpose and happiness by helping the poor. Her story can cut through our emotions and innate desire for luxury to do the right thing.
Because it’s the strength of our relationships that leads to happiness, not money or status. The Harvard Grant Study confirmed this after studying participants over the course of 80 years. Achieving wise wealth is our goal because financial freedom gives us more control over our scarcest resource, time. Becoming a millionaire next door means that we can spend more quality time strengthening our bonds with family, friends, and colleagues.
So next time you’re about to fall into the luxury trap, think of Mother Teresa and remind yourself of what will truly make you happy.
Thanks for reading!
For more, check out some of the books mentioned above (affiliate links, thanks for supporting!)…
The Millionaire Next Door by Dr. Thomas Stanley.
The Luxury Strategy by Jean-Noel Kapferer and Vincent Bastien.
Predictably Irrational by Dan Ariely.
For interesting articles on….
Ancient Rome’s purple dye obsession click here, here, and here,
Mother Teresa’s life and legacy, here,
and the Harvard Grant Study, here.
